fugly's mech system 100 pips a day

Hello friends,

Well I've come across a mech system which is very very simple but seems to be quite promising. Its completely mechanical so you just have to follow the rules. I invite you all to give me your opinion good or bad. It doesn't use any indicators or trendlines or anything, it just uses round numbers somewhat like Jacko's principle.

I'm not the creator of the system I found it on another forum (maybe it originated here in ff ... I don't know) the guy who posted it just made 3 posts and basically disappeared so I'd like you all to back test & forward test, if someone could make an EA that would be great. So far my visual backtesting has been very very successful blown me away and averages 100 pips a day this is after deducting the spread. I believe this can be more if we put in good money management rules. So I look forward to your suggestions however I'd request y'all not to add indicators just suggest mm rules take profit, stoploss and mm.

Pull out an hourly candlestick (you can also use bars but candles are easier) chart of Euro/Usd draw horizontal lines at all values ending with 00, 25, 50, & 75 ...... thats it!

Here are the steps to follow:

1) Select any candle on the chart

2) Identify the color

3) Wait for the next candle to open

4) If the color is not the same as the last hourly candle go long or short once it crosses the next horizontal line.

For eg if the last candle was red and the currrent candle is green go long at the next horizontal line + 1 pip + spread.

If the last candle was green and the current candle is red go short at the next horizontal line - 1pip - spread.

5) Exit half your position at the next horizontal line move the stop to breakeven and let it ride.

or

Exit completely at the close of the candle


or

Exit completely at the next horizontal line after you enter


6) Stoploss is the next horizontal line below the entry line when long or the next horizontal line above the entry line when short.


Gang I look forward to your testing and suggestions and hope you find it useful

I'm puting up a chart of nov 26 if you don't like this day and think its lucky or something please till me which date you like and I'll put up the chart and we'll see .... I'm as curious as you are but I believe you'll still average 100 pips a day which is roughly 2000 pips a month without ant emotional demands

I don't get how you know on the open of the next candle what color it is, this color will change for the duration of that hour if using hourly bars.

I wanted to ask exactly the same thing

If you're watching the candle form, you won't know what color it will be when it closes, but you'll know it's color when you see it cross a line. That part isn't a problem.

Where I see a problem is visually backtesting it using a 1H chart.

You can't look at a 1H bar and always know if it was a winning trade or a loser. You can't always tell the sequence of movement. It'll fool you.

can someone explain more detail .........fugly seem like great but can explain the colour of candlestick .Did you mean that must look at changing colour of two candlestick?

That's why you'll have to look on the smaller TF's to see exactlly how the price moved.

looks interesting

I see only 3 ways of entery

1. you could drop down the time frame
to the 15 min or 5 min on the entery.. best

so you get the trend from the hour
entery from the 5 or 15 min charts

2. wait for price to cross the next line down may 3 pips or the spread.
likely the one he is using

3. find a S/R and use it, but that kind of defeats the purpose of the 25,50,75,100 "majic " numbers thing

cheers

teb

Of course you do.
I'm wondering if Fugly did that, when he was blown away by the results.

Yes obviously hourly is far to large a time frame for this to work on a visual backtest. There is only one way to backtest it properly, and thats to anaylze the exact movement within each hour on a 1-5minute basis for example, just to see if there's any retracement to your stop loss basically.

So if you take the last one hour candle as your direction to oppose, your just setting a load of buy/sell stops at those dedicated levels. I guess the EA could be written easier enough (by someone in the know) by taking the price and doing what is known as a bitwise operation on the last two digits for comparison, if all C++ functions are avaliable for usage that is. I have no experience in creating EAs for MT4 though.

I find it hard to believe that a system like this could be profitable though. I'd wait till someone makes an EA to put this to bed and not waste time backtesting it. It'll either work or it wont. Certainly be a good correlation anaylsis to price at those "emotional levels" all the same i suppose. See if anything rings true. Although "they say" (whoever they are) a lot of people put orders in at 00 and 50 levels, surely at such small intervals the orders between buy and sell stops average out (unless ofcourse your in a strong trend maybe). One persons entry is anothers exit after all. The only principle I can see behind this is that when price hits a level there are enough orders to push it up to the next. But like I say, if this has no other filter, surely it'll average out *shrugs*.

That's why you'll want to backtest it on Vhands or something similar.

I'll look at this over the weekend.
I need some additional info.
The three exit strategies amount to three different systems. Which one do you use?
If you are in a trade, do you exit if another entrance signal appears before you've hit the SL or TP?

You will need this.......

....starting point for the future ea....

Round numbers ending with "00" are always closer to people. For example, if pair EUR/USD is traded at 1.2470 and its price is growing, most stop orders will be placed within one or two points from 1.2500, not say 1.2517.

Trading Strategy Algorithm:
1. Open one-hour chart of EURUSD, lots 0.1.
2. Draw Moving Average with the period of 200.
Buying alert (open two P orders): The price is above MA and intersects the level 15 points below the "round" price.

Selling alert (open two P orders): The price is below MA and intersects the level 15 points above the "round" price.
Closing Trades:
We will close our trades by StopLoss.

Fugly, can you show me on that M5 chart with H1 custom candles where and when you would enter a position.

I know a little bit about this one......

In order to make it work you have to be a bit more aggressive than setting a stop ~25 pips away
and waiting for price to cross the next 25,50,75,00 boundary to TP. That would be too easy.

Essentially, this is a scalping method. Upon the close of the last 1Hr candle, observe the price crossing the next line.
If it's down (therefore a red candle) sell right away, grab a few pips and close it out.
If it's up (so, an up candle: green, white, whatever) immediately buy, you get a few pips and out.
Stop is whatever suits you: 10+ a spread, half a level (~12.5), or go 1:1 basis some closeby target.
25 is too much on some pairs, not enough on others and if ATR 1HR is small, 25 is too much on those too.

There's usually a set up almost every hour in major pairs, now the bad news...

This is not new, it's as old as the hills. If the market's not actually moving, just ranging/bouncing around between
the levels, the method will take a proportional number of stops at the next level, up or down to wash away
many of the profitable pips that would and actually do come from the method.

Sometimes you have to take the same trade, get stopped out, and take it again 2 or 3 times in the same candle just to BE.
Miss one, lose yer nerve, or if the spread goes wacky, then it can even cost a few pips.

Now when the market is actually moving, this thing will actually blow you away (in a good way).
A red candle closes, a new candle turns green (up), breaks a level (25 or 50 or whatever) and runs 100 pips.
Happens EVERY DAY (practically), just look at the EuroYen or the PoundYen.
But you don't get those if you're in and out in just a few pips. Just a piece of it.

So drill down to the 5 min chart, look at how (hint:more importantly when) the signal occured forming the candle.
More often than not, a trend persists, even on a 1hr candle. See why and where and when a few pip stop will save
some of that ~25 + slippage stop up or down to the next horizontal line and how 70%+ of the time
a re-entry after all those dead obvious stops are scooped up by the brokers like they're picking pansys,
the move will continue in the direction of the candle in the 2nd half of the hour or whenever a few minutes later.

Here are 2 tools to use to even further explore this:

One is a tool that simply draws gold horizontal lines every 25 pips. It's adjustable to 30 or 33 or whatever you wish.

The 2nd one is an indicator that draws a 1 hour candle super-imposed over any smaller timeframe (1min, 5 min).
Also can be used to draw the daily candle across the las 24 hourly bars.
That might be more useful for those who trade the daily trend and only want to buy up candles and sell down candles.

I know a little more about this than I'm letting on here, but to answer the obvious question: Does this work ?
The answer is yes it can work, but not quite the way most would try to use it. Most of the time, they'll just burn up stops.

Keep looking at it. There actually IS something there.

Guys I apologize my english is not very good. what I meant to say is if the last hourly candle is a red candle (close lower than open) wait for the next candle to open then if it moves upwards go long when it crosses the next horizontal line by 1 pip. Thereafter it could still go back and close down and you're sl may get hit and you exit. If this weren't the case you would haver absolutely no losses. However once the 00 or 25 or 50 or 75 is crossed there it is likely it will go through to the next level. I can't explain why but it does.

The basic premise is take buy signals after down closes and sell signals after up closes.

This logic is quite sound it originates from Larry Williams volatility breakout system where he looks for buy signals only after a downward movement and vice versa. Its another topic altogether but I traded systems based on this principle which was the one he describes in hias book "Long term secrets to short term trading", I found this premise makes sense and does work.

Hi Billbss,

You are correct it is difficult to backtest visually nevertheless it can be dione to some extent. If you have a candle which crosses a horizontal line and goes beyonnd the next horizontal line you've got your 25 pips profit even if it should then close lower than the open.

It is possible that it crosses a horizontal line then goes down to a lower horizontal line and then goes back up and closes at the next horizontal line above you're entry.

I've done the best I can , I still believe this is a very profitable system I've even if you consider the spread of 3 pips on the EU.

I need everyone's help to formulate the most effective take profit and sl for the system.

thanks for that toshi. That sounds more like it. Very intriguing. No surprises price action is the crux.

Hi pipsrobber

I tried to explain in my reply to 4xtrend and corre I apologise for my english, if you're not able to understand what I'm saying I request if some other member could please just explain in detail.